Delaware Business Bankruptcy Report : Delaware Business Bankruptcy Report : Morris James LLP Lawyers & Attorneys

In re Meridian Auto. Sys., 340 B.R. 740 (Bankr. D. Del. April 17, 2006) (Judge Mary F. Walrath)

A law firm that pre-petition represented a holder of first and second lien secured debt cannot thereafter represent an informal committee of first lien lenders when the debtor seeks bankruptcy protection.      The committee representation is, by its nature, adverse to the interests of holders of other tranches of debt, and the representation therefore is prohibited by Model Rule of Professional Conduct 1.9(a).

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In re Orion Refining Corp. (Syracuse v. Orion Refining Corp.),341 B.R. 470 (Bankr. D. Del. 2006) (Judge Mary F. Walrath)

A contractor sought summary judgment on a complaint he filed to determine title to surplus materials located at a facility the Debtor sold to a third-party. The Debtor filed a cross-motion for partial summary judgment asserting that title to the surplus materials passed to the purchaser of the facility. The Court denied the contractor’s summary judgment motion because the buyer’s interest in the surplus materials as a third party purchaser could not be challenged based upon the contractor’s claim against the debtor. The Court also granted the debtor’s cross motion and released sale proceeds held in escrow to the debtor.

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Pension Transfer Corp. v. Beneficiaries Under the Third Amendment to Fruehauf Trailer Corp. Retirement Plan No. 003 (In re Fruehauf Trailer Corp.), 444 F.3d 203 (3d Cir. 2006) (Circuit Judge Thomas L. Ambro)

The Delaware District Court approved the avoidance of an alleged fraudulent transfer under §548(a)(1) of the Bankruptcy Code of a surplus from a union pension plan that was used to provide benefits to management through a pre-petition amendment to the debtor’s pension plan.

The pension plan had been amended on September 19, 1996 and the Debtor filed its bankruptcy petition approximately two weeks later.

The District Court found that there was not reasonably equivalent value provided to the Debtor for the loss of the surplus used to provide benefits to management. The Defendants had failed to prove that the plan amendment helped to retain key personnel so that the debtor could sell its assets as a going concern.

On appeal, the Third Circuit concluded that the amendment to the pension plan was fraudulent despite the lack of a precise calculation of the benefits conferred and received by the plaintiff.

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In re Exide Techs., 340 B.R. 222 (Bankr. D. Del. 2006 (Judge Kevin J. Carey) 

The debtor sought to reject a trademark agreement and the other party to the agreement argued that the agreement was not executory and, if the agreement was executory, the debtor did not exercise proper business judgment in rejecting the agreement. The Court held that the agreement was executory and approved the debtor’s decision to reject the agreement holding that the debtor exercised proper business judgment.

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